High Street decry short term loans, yet charge even more at times

Many High Street lenders have been highly critical of instant cash loan companies due to their ‘exorbitantly high’ APR interest rates on instant cash loans, yet new research reveals that these same banks charge even higher rates to their customers who become overdrawn.

Providers of no credit check loans are required by law to advertise the APR on their loans, which can be quite high –  as much as 5,000 per cent in some instances.  However, this is nothing in comparison to the eye-watering 819,100 per cent APR on an unauthorised overdraft of £100 from Spain-based banking giant Santander for four short weeks – leading the customer to repay a total sum of £200.

The revelation has sent traditional lenders scrambling for cover, and in doing so have implicitly endorsed short term loans at the same time.  British Banking Association spokesman, Eric Leenders, commented that calculating the cost of an unauthorised overdraft by APR was a ‘mathematical manipulation,’ which is exactly what payday lenders say when confronted with the question as to why their own APR loans are so high.

Traditional lenders have been pointing the finger at payday lenders for far too long, calling the APRs on instant cash loans ‘massive.’  The instant cash loan industry has shot back, remarking that the APR is a poor way to evaluate the cost of an instant cash loan, as annualising an instant cash loan, which is designed to be repaid back within a few days to a month, charges a set fee per £100 borrowed by a customer.

Now, High Street wants to have their cake and eat it too, claiming that it’s inappropriate to translate overdraft fees into an APR rubric because represent borrowing on an overdraft facility.  The irony seems to be lost on them.

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